PEFA 2016 Conference Report

Improving public financial management. Supporting sustainable development.PASTPRESENTFUTURESummary Report of thePEFA ConferenceBudapest, HungaryApril 26—27, 2016

Acronyms and abbreviationsAFD French Development Agency (Agence Française de Développement)CARTAC The Caribbean Regional Technical Assistance Center of the IMFCIPFA Chartered Institute of Public Finance and AccountingDFID The United Kingdom Department for International DevelopmentDeMPA Debt Management Performance AssessmentEC European CommissionIMF International Monetary FundINTOSAI International Organization of Supreme Audit InstitutionsGIFT Global Initiative for Fiscal TransparencyGFS Government Finance StatisticsNORAD Norwegian Agency for Development CooperationODI Overseas Development InstituteOECD Organization for Economic Cooperation and DevelopmentPEFA Public Expenditure and Financial AccountabilityPIMA Public Investment Management SystemPFM Public Financial ManagementPNG Papua New GuineaPER Public Expenditure ReviewTADAT Tax Administration Diagnostic Assessment ToolSECO Swiss State Secretariat for Economic AffairsSIDA Swedish International Development Cooperation AgencySNG Subnational GovernmentWBG World Bank GroupPhotos: Ferenc CsárdásVisuals and infographics: ThinkVisual 2

TABLE OF CONTENTS Page 4 EXECUTIVE SUMMARYPART 1 HOW DID WE GET HERE AND HOW PEFA PARTNERS BECAME INVOLVED IN PEFA Page 6 INTRODUCING PEFA 2016 Page 9 IMPACT OF PEFA ON PUBLIC FINANCIAL MANAGEMENT Page 14 PERFORMANCE Page 17 USING PEFA WITH OTHER PUBLIC FINANCIAL MANAGEMENT DIAGNOSTICS Page 20 Page 21 THE FUTURE OF PEFA – OPPORTUNITIES TO INCREASE ITSPage 24 VALUE FOR PUBLIC FINANCIAL MANAGEMENT Page 28 PEFA at the Subnational Level Page 30 Strengthening Public Financial Management Through PEFA Using PEFA to Improve Accountability and Internal Control Page 32 What More Could PEFA Do in the Future? BEYOND THE CONFERENCE: WHERE DO WE GO FROM HERE? 3

EXECUTIVE SUMMARY Participants heard how PEFA has developed into the ‘gold standard’ of high-level PFM assessments, with more than 500 reports produced in 150 countries at national and subnational levels. They also heard about the Partners’ plans to strengthen the usefulness and impact of PEFA through greater involvement by users in providing feedback and sharing knowledge on good practices. The conference sessions, led by PEFA Partners, com- prised a number of inspiring presentations on the use of PEFA and related PFM reform experiences from vari- ous parts of the world, including Papua New Guinea (PNG), Vietnam, Morocco, Tunisia, Liberia, Costa Rica,The event was facilitated by Marius Koen, Lead Financial Management Brazil, Timor-Leste and Bangladesh. Conference partici-Specialist at the World Bank. pants heard how PEFA assessments have been instrumen- tal in obtaining political support for PFM reforms, coordinat- ing efforts to build understanding, identifying priorities andPEFA 2016, the upgraded Public Expenditure and Fi- sequencing PFM reform actions, as well as monitoring andnancial Accountability (PEFA) Framework, was evaluating progress over time.launched in Budapest, Hungary on 26—29 April, 2016.More than 300 participants from 76 countries attended the Additional perspectives on PEFA and the challenges ofevent which discussed how PEFA has evolved since the analyzing PFM performance and achieving effectiveprogram was established in 2001, examined the main fea- change were provided by international organizationstures of “PEFA 2016”, and considered how the PEFA pro- such as the Global Initiative for Fiscal Transparencygram could add even more value to reforming country Pub- (GIFT), the Chartered Institute of Public Finance and Ac-lic Financial Management (PFM) systems. counting (CIPFA), the Overseas Development Institute (ODI), the Swedish International Development CooperationThe event was hosted by the seven PEFA Partners and Agency (SIDA)’s Gender Responsiveness project, and oth-the PEFA Secretariat. Representatives from national er experienced PEFA users. All noted that PEFA providesand subnational governments, international financial, devel- users with information to apply a focused, coordinated, andopment and standard-setting organizations, research and evidence-based approach to institutional strengthening andtraining institutions, public financial management practition- capacity building in PFM. PEFA can also be a catalyst for aers, PEFA assessors, and academics, participated in the coordinated approach to reform, owned and led by coun-conference. tries themselves. Several of the panelists emphasized that PEFA scores should not be used simplistically as the soleDuring the first two days of the event, participants basis for PFM reform design.heard how and why the seven Partners decided to cre-ate the PEFA Framework. The Partners wanted to cre-ate a common tool for obtaining information needed bygovernments and development institutions about the per-formance of country financial management systems. It wascrucial that diagnostic work would be country-led, and thatthe information would be shared amongst all stakeholders. 4

Participants’ expectations from the event.Participants were able and encouraged to exchange gy, indicators and dimensions and the PEFA report con-experiences and ideas during group discussions on tent. It introduced participants to the four phases of the PE-four important areas where PEFA is being strength- FA assessment cycle, and the ten steps to making the bestened as part of the upgraded program: PEFA at subnation- use of PEFA. Overall, the participants were satisfied withal government; strengthening PFM systems through PEFA the workshop and particularly enjoyed the practical exercis-2016; using PEFA to improve internal control; and what es and case studies, in addition to the peer-to-peer learningmore could PEFA do in the future. These sessions generat- amongst participants.ed a wealth of information on how to improve the effective-ness of PEFA which is being analyzed by the PEFA Secre- The Budapest event was an important step on the jour-tariat and will be used in strengthening guidance and other ney to transform PEFA into more than a respected andaspects of the program over the coming months. widely used methodology for PFM performance as- sessment. The PEFA Secretariat outlined a number ofIn addition to focusing on PEFA, the conference host- initiatives, including: creating an online PEFA Handbook,ed a unique “marketplace” to inform the participants which will provide users with detailed technical guidance onon other PFM diagnostic tools and analysis.1 Many of all aspects of PEFA including how to plan, implement andthe products on display were complementary to PEFA, but use PEFA 2016; improving database accessibility througheither drilled down into specific aspects of PFM or consid- the new PEFA website; developing an online PEFA as-ered it in the context of a wider system of public administra- sessment tool (e-PEFA); refining the guidance for SNGtion and management. assessments; and strengthening capacity for using PEFA 2016 through better learning tools and events. Most im-The PEFA Partners have commissioned a study to map portantly, the Secretariat announced its plans to increasethe range of PFM analytical techniques that have exchange of information on good practices and PEFA suc-emerged over the last decade. The study seeks to ex- cess stories and to facilitate dialogue between users byplain the relationship between PEFA and other techniques establishing a global PEFA knowledge sharing network.and to provide advice to governments and their develop-ment partners on how to choose the right technical support 1 PFM diagnostic tools displayed in the marketplace included: IMF:methods for their needs. The initial findings of the studywere presented at the event. Fiscal Transparency Code and Evaluation; PPP Fiscal Risk Assessment Model; Public Investment Management Assessment; WBG: BOOSTThe newly developed PEFA 2016 training workshop Initiative to Promote Open Budgets; Debt Management Performancewas delivered in Budapest for more than 250 partici- Assessment (DeMPA); the Procurement Framework; INTOSAI: SAIpants. The training program provided an overview of Performance Measurement Framework (SAI PMF); Tax AdministrationPEFA 2016, detailed explanation of the scoring methodolo- Diagnostic Assessment Tool; ODI: Innovative Research and Technical Assistance for Public Financial Management Reform; OECD: Ten Princi- ples of Good Budgetary Governance; CIPFA: The Financial Management Model; GIFT: Indicator of Public Participation in Fiscal Policy; IBP: The Open Budget Index. 5

HOW DID WE GET HERE ANDHOW PEFA PARTNERS BECAMEINVOLVED IN PEFAPEFA partners speaking at the event. From left to right: Elena Arjona Perez, European Commission; MonicaRubiolo, Swiss State Secretariat for Economic Affairs; Rajesh Kishan, UK Department for InternationalDevelopment; Jennifer Thomson, The World Bank; Håkon Mundal, Norwegian Agency for DevelopmentCooperation; Rachel Ruamps, Ministry of Foreign Affairs and International Development, France; and BrianOlden, International Monetary Fund.PFM systems contribute to reaching the sustainable The need to harmonize the many PFM assessmentdevelopment goals through the efficient provision of tools that were in use in the early 2000s, was the mainservices to citizens, and ensuring that public funds are reason for the Partners to become involved in PEFA.used transparently. Due to these links there has been The Swiss State Secretariat for Economic Affairs (SECO)a keen interest in understanding how well PFM systems and the Norwegian Ministry of Foreign Affairs (NORAD)are performing in countries across the world, and hence explained how their interest in the PEFA program had de-the widespread use of the PEFA Framework, which is de- veloped from the emerging aid effectiveness agenda at thesigned to offer that understanding. PEFA 2016 reflects the time, in particular the focus on strengthening governmentevolution of expectations regarding the achievement of systems and reducing the transactions costs for partnersustainable development goals, improvements in service governments through harmonization of assessments andprovision as well as efficiency and transparency: all have greater use of country systems. An important means formoved on since the original framework was launched in contributing to that agenda was programmatic support, in2005. particular budget support, which was always linked to the performance of PFM systems and their gradual strengthen- ing. 6

The PEFA program’s objective and its “strengthened A contrasting experience was offered by the IMF, whoapproach to supporting PFM reform” appeared to pro- despite having recognized the need for harmonizationvide a way forward. SECO and NORAD as relatively of the many overlapping PFM assessments takingsmall contributors of development support, had not devel- place at the time, were initially concerned that a singleoped their own PFM assessment tools and relied on as- tool such as PEFA would prove to be too difficult to man-sessments initiated by the larger development agencies age, especially in terms of ensuring the quality of assess-using their respective tools. As those tools were many, of- ment reports that would be produced by the decentralizedten overlapping, and applied with little coordination, the PEFA assessments process. However, these concernsPEFA program’s objective and its ‘Strengthened Approach were gradually overcome following PEFA issuance of de-to Supporting PFM Reform’ appeared to provide a way for- tailed guidance material to help ensure the consistency ofward. SECO and NORAD found it easy to collaborate in assessment standards, and the development of a well regi-the partners’ group and to get internal support in their re- mented and largely successful quality assurance system.spective organizations, as they were not tied to the use ofany of the prevailing assessment instruments.“PEFA 2016 will “PEFA allows us toprovide an support PFM reformsimproved basis for in partner countriesmeasuring PFM and thus help them toperformance.” collect more revenues and spend money better.” “PEFA is a common “We have been approach for involved in PEFA partners to since the start and understand what we remain good PFM systems committed to it.” are.” “PEFA assessments arm us with sufficient information to apply a focused, evidence-based approach to capacity development.” “PEFA provides a “PEFA has also holistic and common been effectively perspective on the applied at the quality of PFM.” subnational level.” 7

How has PEFA met the Partners’ needs,and what is the key expectation for thefuture of PEFA?The Partners agreed that the PEFA Framework had would best fit that purpose. Better coordination was alsomet important organizational needs for all of them, expected between system-wide PEFA assessments andwhich was reflected in the tool’s rapid roll-out and ex- drill-down diagnostics on selected sub-systems.tensive use across all regions. The PEFA Partnersgoals were to develop a common tool, with the shared da- There was a common expectation amongst PEFA Part-tabase, that could contribute to PFM reform dialogue. ners that the PEFA reports would increasingly provideHowever, those goals were just a means to the real objec- a rich narrative with a clear story line to support thetives of achieving better public financial management, and subsequent policy dialogue in PFM reform. While theimproving the use of public funds for the benefit of citizens PEFA scores provide guidance on areas of weaknesses inand for sustainable development more broadly. PEFA has PFM they should not be used simplistically. The PEFA as-played an important role in achieving those wider objec- sessments should place less emphasis on individual indi-tives. The PEFA Framework can help governments to cator scores, so that PFM reform dialogue can get awayidentify the strengths and weaknesses in PFM, and subse- from a focus on any and all low scores, and become morequently how the identified strength and weaknesses could selective in addressing the issues which are particularlyaffect success or failure in achieving better use of public relevant to the specific country circumstances, such asfunds. Through systematic application of PEFA assess- political economy, cultural, legal, institutional, and adminis-ments over time, governments can see how they are im- trative and resource factors as well as capacity to initiateproving and what else is needed to achieve reliable and reform in each area when needed.robust PFM systems. They can also see how to get thebest outcomes for public services and sustainable devel- Transparency and accountability will be enhancedopment. through the publication of reports and their use by in- country stakeholders. The publication rate of assess-The World Bank Group (WBG), European Commission ment reports is improving and it is expected that additional(EC) and the UK Department of International Development progress will be made. This is important for ensuring a(DFID) elaborated on how the PEFA Framework had met broader use of the reports by in-country stakeholders suchtheir needs. Key benefits of PEFA were emphasized: clear as civil society organizations. It would also help academialinkages to higher level development goals; ability to cre- and researchers to get access to the rich information in theate a common starting point for dialogue on PFM issues; reports. Additionally, there was an expectation that PEFAscope and quality assurance systems which made PEFA assessments could contribute to inter-country knowledgeassessments credible as a strong and realistic basis for sharing and cooperation by enabling comparisons of PFMboth dialogue on reform priorities and for monitoring the systems across countries and exchanging experiencesimpact of reforms on performance over time; and monitor- and ideas on strengthening the PFM systems.ing governments’ results and actions related to develop-ment partners’ operations.The Partners’ expectations ranged from where andhow PEFA 2016 is applied to how the assessments aremade available and used. Whilst it is anticipated thatmany countries will use the tool at national/central govern-ment level, there is also a clear expectation that it will beused increasingly at the sub-national government (SNGs)level: more guidance will be issued on how the Framework 8

INTRODUCING PEFA 2016PEFA pillars of public financial management performance Pillar One Pillar Two Pillar ThreeBudget reliability Transparency of public Management of assets finances and liabilities Pillar Four Pillar Five Pillar Six Pillar Seven Policy-based fiscal Predictability and Accounting and External scrutinystrategy and budgeting control in budget reporting and audit executionPEFA has developed into the ‘gold standard’ for high tutions to measure their own impact on global PFM. It haslevel PFM assessments, with more than 500 reports been included within the United Nations (UN) ‘sustainableproduced on 150 countries at national and subnational development goals’ and the 2016 anti-corruption summitlevels. In the 15 years since the PEFA program began, communique. It has been the model for development ofthe simple goals of developing a shared tool and a com- related tools such as the Tax Administration Diagnosticmon data base, have matured into a globally respected Assessment Tool (TADAT), the Debt Management Perfor-standard for measuring PFM performance. Around half of mance Assessment (DeMPA) and the International Organi-the reports are ‘successive assessments’ in countries that zation of Supreme Audit Institutions (INTOSAI)’s SAI PMF.had previously undertaken at least one previous assess-ment. Countries and their development partners have used Development of PEFA 2016, which marks the mostthe reports to highlight strengths and weaknesses in PFM comprehensive upgrade to the PEFA framework sincesystems, and have prepared PFM programs and reform it was first published in 2005, was undertaken throughaction plans drawing on PEFA findings. They have also a global consultation process, involving numerousused PEFA performance indicators to monitor progress stakeholders. In 2012, the PEFA Partners launched theagainst their reform action plans. Additionally, the PEFA upgrade including a wide consultation process, duringdatabase has been used in a growing number of research which the PEFA Secretariat received more than 800 spe-studies on the quality of PFM, and the factors contributing cific suggestions for further refinements of the Framework.to change, or lack of change. Stakeholders including PEFA and PFM experts and practi- tioners from governments, international institutions, privatePEFA has been adopted by international institutions sector and non-government organizations, were involved inand it has been a model for developing related diag- the consultation process.nostic tools. It has been adopted by international insti- 9

NETWORKSLewis Hawke, Head of the PEFA Secretariat, presenting PEFA 2016.A revised, ‘Testing Version’ of the Framework was re- set the new baseline and 2011 to track performanceleased in January 2015 (PEFA Framework, Testing Ver- changes over time. Many of the reports based on the 2015sion, 2015), incorporating refinements drawn from the glob- testing version are being aligned to PEFA 2016.al consultation and preliminary testing processes. TheTesting Version was eventually used officially in 27 coun- As PEFA 2016 is more demanding than the previoustries across almost all regions, income groups and political version, the conference participants expressed theirand administrative heritage systems. Supplementary concern about maintenance and enhancement of quali-‘shadow testing’ was conducted in many of those countries ty assurance. It is acknowledged that the PEFA 2016 isto examine the implications of additional refinements, in- expanded in scope and depth will lead to challenges fortended to address apparent shortcomings of some indica- assessors in writing the report. Quality review of draft re-tors in the Testing Version. ports by the Secretariat will provide assurance that the as- sessments are consistent with the upgraded PEFA require-The PEFA Steering Committee approved the final ver- ments. The Secretariat continues to offer guidance and ission of the PEFA 2016 Framework and released it on committed to be more accessible to assessors, in particularFebruary 1, 2016. during the preparation and planning phase of an assess- ment, which is crucial.The key features of the upgraded version, called PEFA2016 are: The PEFA Secretariat will provide continued support to 31 indicators, containing 94 specific performance managers, assessors and other stakeholders on PEFA measures, across these 7 pillars of PFM. 2016. The Secretariat is creating an online PEFA Hand- Expanded scope to include more coverage of central book, which will provide users with detailed technical guid- government performance and to include non-tax reve- ance on all aspects of PEFA including how to plan, imple- nue. ment and use PEFA 2016. Greater emphasis on transparency of government The PEFA Handbook will be the primary source for plans and achievements. More attention to non-cash aspects of public finances, guidance materials for managers, assessors and other such as assets, liabilities and non-financial perfor- stakeholders on PEFA 2016. The Handbook is a dynam- ic document that will be updated progressively in response mance. Stronger focus on fiscal strategy, risk management and to clarifications, improved content and additional infor- mation to help users. The user guidance also includes a internal control. glossary of terms and Frequently Asked Questions (FAQs) which will be regularly updated in response to questions, More precise measurement and, in some case, stand- queries and clarifications raised by the PEFA community. ards for scores have been increased in line with good Other guidance on PEFA includes previous versions of the PFM practice. Fieldguide (2012), template forms and discussion papers for use in tracking performance changes over time when an Better alignment of terminology and measurement with global standards and related tools.Since the release on February 1, 2016, the PEFA Secre- earlier version was used in the previous assessment.tariat noted that around 16 assessments based on PE-FA 2016 Framework have already started. During thetesting phase, many countries preferred using both 2015 to 10

Elena Arjona Perez, European Commission (Chair of the session).From left to right: Tony Bennett, Chartered Accountant; John Otieno Ogallo, The WorldBank; Brian Olden, International Monetary Fund; Elena Arjona Perez, EuropeanCommission (Chair of the session); and Ken Ngangan, Secretary for Finance,Government of Papua New Guinea.Ken Ngangan, Secretary for Finance, John Otieno Ogallo, The World Bank. Brian Olden, International Monetary Fund.Government of Papua New Guinea.PEFA SUCCESS STORYThe experience of Papua New Guinea with the PEFAFramework Testing Version: Using PEFA framework gavePNG one single roadmap which helped to align allstakeholdersPrevious assessments of PNG were carried out in 2005 and 2009. PNG used the PEFAframework testing version at the request of the IMF to set the new baseline and the 2011framework to monitor progress since the previous assessment. As the scope of thetesting version framework was broader than the previous framework reflecting recentadvances and current expectations in PFM reform, the assessment provided a more in-depth analysis of PFM system and identified more weaknesses. The assessmentprovided a pool of objective information to assist all stakeholders understanding thecurrent status of PFM and on decisions on future reforms. The PEFA assessment guideddevelopment of an action plan and reform program: PEFA Road Map 2015-2018. Aimingat enhancing transparency and accountability, the PEFA assessment report waspublished.The next challenge for PNG will be to use the PEFA 2016 framework at the SNG level. 11

TOP 5 QUESTIONS FROM THE AUDIENCEWhat was the rationale for the upgrade to PEFA 2016? PEFA 2016 reflects the changing landscape of PFM reforms and the evolution of good practices over the last decade. PEFA 2016 builds on the foundations of the 2005 and 2011 versions through the addition of four new indicators, the expansion and refinement of existing indicators, and a recalibration of baseline standards for good performance in many areas.What are the most significant changes to the scope of the Framework? The most significant changes to the scope of the framework included stronger emphasis on transparency and internal control along with the introduction of service delivery performance management, although this may be challenging for many countries. The good practices of setting clear fiscal policy objectives as well as publishing robust fiscal forecasts are now also addressed, as is the extent to which a country can plan and respond better to unexpected changes in the macroeconomic environment. Other major additions include the introduction of an indicator dealing with the often neglected area of asset management (including non-produced assets such as natural resources, and also dealing with disposal), and the investment process is also now captured, as are contingent liabilities. During the conference, participants were asked to send their questions to the panelists using an online system called sli.do. All the questions raised at the conference will be addressed on the PEFA website and in guidance materials. 12

Participants asking questions during the event, using their mobile phones.Is it not the time to prepare a PEFA framework dedicated to subnationalgovernments? PEFA has always been a uniform assessment tool. The PEFA Partners have noted the importance of the tool for SNG, based on analytical research on the PEFA data basis since 2005. The PEFA Secretariat is working on the review of SNG guidance to identify where it can be strengthened and made more useful to governments and development partners.Will it be possible to monitor progress between periods where different PEFAframeworks were applied? Does the PEFA Secretariat plan to provide guid-ance on this? The Secretariat has published guidance on monitoring progress between periods where different PEFA frame- works were applied. The document, Guidance on tracking performance across time: Comparing PEFA 2016 against PEFA 2005 or PEFA 2011, can be found on the PEFA website. Achieving precise comparability during the transition to PEFA 2016 is challenging, but the subjects covered in all versions of PEFA are largely the same. This allows the measurement of changes over time to complement PEFA 2016 assessments in most areas. New topics introduced by 2016 cannot be compared but they will supplement information from other subjects that have been retained. Within a few years PEFA 2016 reports will provide the baseline for future tracking of changes over time.What were the reasons for removing the three ‘donor’ indicators? The three donor indicators have not been eliminated, but many of the issues have been captured through the expansion of other indicators, e.g. Pillar I now includes external sources of revenue and related expenditure. This will allow adjustment for those countries where donor assistance is important, but also cover countries where no external aid exists. Similarly, assessment of expenditure and revenue outside financial reports, budget preparation and financial reporting all cover external resources. Donor use of country systems is no longer captured, but will be assessed by other tools. PEFA Secretariat is working on this with the OECD. 13

IMPACT OF PEFA ON PUBLICFINANCIAL MANAGEMENTPERFORMANCEFrom left to right: Matthew Smith, The Caribbean Regional Technical Assistance Centre, IMF; Simon Gill,Overseas Development Institute; Herbert Soper, Ministry of Finance and Development Planning, Liberia; HåkonMundal, Norwegian Agency for Development Cooperation (Co-chair of the session); Lewis Hawke, Head ofPEFA Secretariat (Co-chair of the session); Aziz Khayati, Ministry of Economy and Finance, Kingdom ofMorocco; and Martha Cubillo Jiménez, Ministry of Finance, Costa Rica.In assessing the achievements and lessons that have been these systems by donors. The three elements of thelearned from the last 10 years of using PEFA, conference ‘strengthened approach’ require a country (rather thanpanelists noted the importance of PEFA assessments and ‘donor’)-led approach, the use of a common assessmenthow they have been used to reform PFM systems, improve tool (i.e. which was the driver behind the development ofservice delivery, and monitor progress over time. The con- the PEFA Framework), and a coordinated and harmonizedference panelists also noted the importance of a country- donor community.led approach, donor coordination and the intention of de-velopment partners to use and strengthen country PFM Successful PFM reforms tend to be evolutionary rathersystems. than revolutionary. There was general agreement that successful reforms tend to be evolutionary rather than rev-The PEFA program’s objective and the “strengthened olutionary, and that ‘taking stock’ following a PEFA assess-approach to supporting PFM reform” has contributed ment allowed for the consolidation of PFM activities in theto the strengthening of country systems, although specific country context, taking into account the weakness-there had been limited success in achieving greater use of es identified as well as the political economy. 14

Experience suggested that in several countries, assess- fied as potential difficulties in designing reform pro-ment results have been useful as an introduction to reform, grams. However, a meaningful dialogue about the pri-although the priorities and sequencing have been very oritization of reforms could overcome these pitfalls. Oncemuch determined by exogenous factors: the danger of fol- agreed, reform programs can be monitored by the interme-lowing a ‘pro-forma’ approach to reform programs was not- diate use of particular PEFA indicators or dimensions; em-ed. Simon Gill from ODI encouraged countries to follow bedding them into the government’s monitoring and evalua-Norway’s example in considering carefully the implications tion framework; or, including PEFA indicators or dimen-of PEFA scores for the effectiveness of their country’s PFM sions in a results framework for country reforms. In addi-system and only making changes which would be compati- tion, a successive assessment–a few years later–can helpble with better PFM performance, not simply because they to focus on the gaps or more persistent challenges in re-received a low score. form efforts, for example, PFM systems can degrade over- time, which may be a problem if attention is focused onlyPEFA assessments have been used to reform PFM sys- on limited areas identified for reform.tems, improve service delivery and monitor progressover time. Achieving the best possible value for money In summary, the country case studies showed differentfrom public resources through transparent and accountable approaches to using the results of a PEFA assess-public finances is an effective way to achieve sustainable ment. For example, some reform efforts focused onimprovements in the range, quality and access to essential many areas of weakness identified by the PEFA assess-public services. Conference participants shared specific ment while others focused on a few. There was a certainexamples of how weaknesses revealed by the PEFA as- sense in which reform programs follow “pro forma” recipes,sessments, helped in designing country’s PFM reform pro- although in some cases the prioritization of activities wasgram, and subsequently monitor progress over time. It was determined by the political economy environment. All thealso noted that some issues identified as weaknesses in a case studies demonstrated the use of the PEFA tool forPEFA assessments may be politically challenging, possibly monitoring progress over time: not necessarily by using allrequiring changes to the country’s Constitution, and hence the indicators, or at the recommended frequency of three ormay be unlikely to be addressed in the short term. four years. More regular self-assessments of some indica- tors had been invaluable in some of the illustrations provid-An undue concentration of ‘form over function’ and too ed.great a focus on the Ministry of Finance, were identi-“After PEFA we are more “PEFA hasaware of the need to accompanied ourprovide relevant reform program,information to the public strengthened it andand partners about our gave us clear ideas forpublic finances.” the future of PFM. ““PEFA is a great invention “Country ownership in reformingand great contribution to PFM is key. Therefore it isPFM. When translating PEFA important that countries maketo PFM reforms I advise you PEFA as part of their cycle ofto think like Norway! PEFA is thinking and managing reforms.established to drive forward This is something we havea country-led approach.” supported in the Caribbean countries. 15

Aziz Khayati, Ministry of Economy and Finance, Matthew Smith, Caribbean Regional Technical Assis-Kingdom of Morocco; and Martha Cubillo Jiménez, Ministry tance Centre, IMF.of Finance, Costa Rica.Simon Gill, Overseas Development Institute; and Håkon Mundal, Norwegian Agency for DevelopmentHerbert Soper, Ministry of Finance and Development Cooperation and Lewis Hawke, Head of PEFA SecretariatPlanning, Liberia. (Co-chairs of the session).PEFA SUCCESS STORYLiberia uses PEFA assessments to reform its PFM and monitorprogress over time Liberia has been using PEFA assessments to streamline its PFM reform program. Liberia has prepared three PEFA assessment (2007, 2012, and 2014). PEFA self- assessment helped the country gather evidence-based information across different aspects of PFM to pinpoint key challenges as well to understand where progress was made. These created important learning loops which were included into the design of country’s PFM reform program. The results of the self-assessment showed significant improvements compared to the 2012 assessment. The positive results had been achieved as a consequence of the continued strong political commitment to the PFM reform strategy and the determination in implementing reforms despite the human resource constraints coupled with scarce economic resources. Importantly, the self-assessment also revealed what PFM areas need to be strengthened. These included internal controls, revenue mobilization, medium-term budgeting, cash management, commitment controls, and fiscal decentralization. Consequently, the government has made important steps in reforming its PFM system in line with the assessment findings, including rolling-out the IFMIS to additional ministries and agencies, and strengthening the external audit performance. 16

USING PEFA WITH OTHERPUBLIC FINANCIALMANAGEMENT DIAGNOSTICSThere is an increasing number of PFM diagnostic tools 2016, will include a draft guide of using PEFA 2016 frame-available, mainly reflecting emphasis on more specific work as a baseline, to help governments identify the bestand detailed aspects of matters outside the scope of PE- instrument for their needs, and where additional instru-FA, or where PEFA only provided a high-level perspective. ments may be useful. This will contribute to a clearer un- derstanding of how the various tools can support govern-In broad terms, there are two main categories of tools. ments to achieve their PFM goals.The first category includes those tools that take a narrativeapproach i.e. Public Expenditure Review (PER), and pro- The possibility of strengthening the links between oth-vide detailed explanations, for example of the causes of er diagnostic tools and PEFA could be addressed in aweaknesses. They tend to be more tailored to specific situ- number of ways. One option would be to coordinateations and focus on interpretation and analysis. The sec- the diagnostic tools around the reform cycle. While PEFAond category includes diagnostic tools (such as PEFA), is designed to provide a high level view of the PFM perfor-which apply a more standardized set of benchmarks or mance, understanding the factors and underlying causesprinciples. These tools are useful for measuring changes that generate weaknesses requires drill-down diagnosticsover time and highlighting strengths and weaknesses, but to provide the basis for a reform action plan. Another op-less suited to taking into account country-specific nuances. tion would be to ensure that the technical aspects of all PFM diagnostic tools are aligned and compatible. Finally,The PEFA Secretariat has sought to liaise closely with harmonizing instruments at the country level, by improveddevelopment partners responsible for other diagnostic planning and coordination of missions to reduce the bur-tools. Considering the overarching nature of PEFA den on partner governments and minimize the risk of gen-compared to the more detailed drill down diagnostic anal- erating different results. This may also have an impact onyses of the other tools (TADAT, PIMA, DeMPA, MAPs, the quality of the reports and the availability of good evi-etc.), the Secretariat has tried to harmonize indicators, dence.scoring and calibration with those tools.Additionally, the PEFA Secretariat has commissioned Rajesh Kishan, UK Department for International Development.a research project to identify the main characteristics,strengths and limitations of the various tools availableto diagnose a country’s PFM system and to providepractical advice on how best to use them in the con-text of reform actions and the sequencing of reforms.The project involves updating work undertaken in Novem-ber 2011 by the Organization for Economic Cooperationand Development (OECD) taskforce on PFM, by looking atthe characteristics and objectives of more than 50 diagnos-tic tools to identify which are: (i) broad diagnostics; (ii) toolsspecific to particular PFM elements; and (iii) donor-specificarrangements at national and subnational levels. The pro-ject report, which is expected to be finalized in September, 17

Fred Mear, Lecturer, De Montfort University, United Frans Ronsholt, PFMNEExpTeWrtOanRdKFSormer Head of the PEFAKingdom. Secretariat.The event also featured a “market place” where the diagnostic tools were displayed and representatives were availableto discuss their characteristics with participants. 18

TOP 5 QUESTIONS FROM THE AUDIENCEWhat necessitates the use of drill down tools? PEFA can only say so much about the breadth of the topics included in an assessment, so when weaknesses are identified specific drill down tools are required to look at the underlying features more closely.With 50 PFM tools, which are better? PFM tools based on scoring are more suited to establish differences from particular standards but tend to lose the specificity of information that narrative tools provide, for example, PERs and expenditure tracking surveys identify where money is going and what is actually happening.Should we aim to consolidate all diagnostic tools into one PEFA? No, because one tool that covers everything would be so enormous as to be effectively unmanageable. Coordination is a better solution than overlapping.Do all benchmarking tools adopt the same international standards? PEFA has adopted recognized good practice standards that come from other instruments, statistical frameworks and professional standards. Recognition that international standards are not static was a major driver of the upgrade to PEFA 2016.What tools would pick out the problem that PEFA misses? PEFA is not a catch all tool, and for example does not cover performance of State Owned Enterprises. Tools should be selected based on the purpose of the assessment and what needs to be measured and assessed. However, if a number of diagnostic tools are to be used, the aim should be to share knowledge and information generated. 19

THE FUTURE OF PEFA –OPPORTUNITIES TO INCREASE ITS VALUEFOR PUBLIC FINANCIAL MANAGEMENTThe conference group sessions focused on the future of PEFA and the opportunities toincrease its value for public financial management reform.Conference participants engaged in more in-depth discussions on PEFA’s future and presentedtheir hands-on experience with PEFA.Four concurrent group sessions were held to discuss PEFA’s strengths and opportunities.#1 PEFA at the Subnational Level#2 Strengthening Public Financial Management through PEFA#3 Using PEFA to Improve Accountability and Internal Control#4 What More Could PEFA Do in the Future? 20

PEFA at the Subnational Level NETWORKS Kamilia Hmila, Municipality of Sousse, Tunisia; and Graziela Luiza Meincheim, Government of Santa Catarina, Brazil.Jean-François Almanza, Agence Française de Développement;and Franziska Spörri, Swiss State Secretariat for Economic Affairs(Co-chairs of the session). Participants discussing strengths and opportunities of PEFA at the subnational level.The working group through the presentation of two  PEFA can be used as part of a communicationcase studies and peer-to-peer learning, took stock of strategy of a SNG to attract investors and project athe lessons learned from using PEFA at the SNGs lev- positive image of sound governance. In this case PEFAel, to identify good practices, and to reflect on potential is not only a starting point for reforms to be undertaken,forthcoming steps in the use of PEFA at SNGs. While but also a way of spreading information about reformsinitially most of the PEFA assessments were carried out at already achieved;the central government level, the number of assessments at the subnational level has been growing. As at the end of PEFA should be used only to assess areas whereJune 2016, almost 40 percent of all the assessments have there is real autonomy and freedom for SNG deci-been undertaken at a variety of subnational governments,  sions about the use of resources;including federated states inside a national federation,provinces, regions, districts, departments, and municipali- The methodology is not designed for making compari-ties.  sons, however they are often used in this way either by donors or other entities;The main issues which came from the discussion that fol- lowed the case studies can be summarized as follows: SN entities and central government: PEFA applies to any type of system, federal or unitary. Among PEFA strengths: it is an independent and The PEFA framework does not match all situations; forobjective methodology; it focusses on transparency  some people, the ’PEFA fit all’ approach is not applica-and disclosure to citizens; attention is paid to service ble; some SN need specific indicators;delivery; it helps the decentralization process and facili- Key factors for the success of PEFA SNG assessment are:tates dialogue between SN entities and the CG, private  Government initiative and impulse by political lead-sector investors, donors, other SNs; and, it can be ers together with a constructive dialogue with do- norsused as a self-assessment tool (e.g. for service deliv-  Training of staff, sharing of knowledgeery);  Transparency and publication (visibility as a basis Motivations for launching a PEFA evaluation are for credibility).important; also the issue of who has the initiative; 21

PEFA at subnational level: Municipality of Sousse, TunisiaNETWORKS Tunisia has embarked on a decentralization reform as outlined in the country’s new Constitution enacted after the 2011 revolution. The main reason for conducting the six PEFA municipal assessments was to set the baseline to compare the status of PFM at SN level prior to decentralization reform and subsequent improvements. Sousse is the third largest municipality in Tunisia, with 235,000 inhabitants, and representing 3.3 % of overall subnational budget. The objective of Sousse PFM managers was to compare their performance and achievements relative to other municipalities. Prior to PEFA, the government of Sousse launched an internal partial assessment, which was not published and subject to “excessively favorable interpretation” by elected political leaders. Amongst the main weaknesses revealed by the PEFA assessment, was the lack of a structured internal control system, including internal audit, and reliance on the existing limited controls based on alerts. PEFA assessment helped to introduce new tools such as a monitoring systems for arrears, fiscal calendar and to create a small internal audit unit.PEFA has confirmed that the level of revenue is not sufficient if there is no credible system in place forrevenue allocation. PEFA will increase visibility and credibility of SNG. Tunisian legislation provides moreresources to SNG outside the littoral, which don’t benefit from tourism, therefore SNGs on the littoral will beobliged to be more efficient with less resources, and to convince their partners. PEFA highlighted theimportance of transferring more resources from central government to improve PFM performance. PEFA alsoserved as a common basis for dialogue with donors, i.e. SECO, to obtain more resources.However, PEFA has some constraints and limitations, as it does not provide explanation on the underlyingcauses of poor/good performance, thus the government has to find the proper explanation, using otherspecific tools. PEFA allows SNG to score well without any merit, when the system is managed by centralgovernment (e.g.: PI-19 procurement system, PI-14 & 15 tax collection). Consequently it is important to strikea balance and ensure that PEFA assesses only areas where a true local autonomy exits.PEFA at subnational level: Santa Catarina State, BrazilSanta Catarina (SC) State is the size of Portugal and has the 6th highest GDPin Brazil. The initial proposal to conduct a PEFA assessment came from theWB, which was then accepted by SC Government. The main motivation for aPEFA assessment was not to have access to resources but the need forobtaining an international recognition of the good PFM practices, which werealready identified at the national level.The assisted self-assessment was managed by a Steering Committeecomprising staff from various directorate. The assessment team prepared thepreliminary PEFA assessment report by conducting interviews, reviewingdocumentation, gathering and analyzing data during the field visits. Thepreliminary assessment report was submitted to the PEFA Secretariat forreview. The PEFA assessment helped to engage staff from various directoratesand create a common knowledge and sense of responsibility, through theintensive training of civil servants. Overall, the experience of Santa Caterinawith PEFA is a concrete example of the range and diversity of SNGs using thePEFA Framework. 22

SN-PEFA contributes to people Adjustment of some PEFAwellbeing, because SN-entities indicators to make themare closer to service delivery more relevant to subnational governments Allows strengthening PEFA assessmentcapacities of civil servants to framework needs to be improve service delivery calibrated for SNGsVery clear assessment PEFA can help governmentsframework with clear and self- to diagnose the weaknessesexplanatory benchmark and give recommendations for improvementTool that facilitates comparison Vast room for self- between different SNGs assessment using PEFA across government sectorsPEFA provides an objective basis for Evidence led fiscala dialog between the SNG and decentralization reformscentral government, as well asdonors and other institutionsPromotes confidence in PEFA might contribute to adecentralization of fiscal policy dialog between SN-level and central level about roles & responsibilities To establish the link between PFM and the delivery of local public service 23

Strengthening Public FinancialManagement through PEFA NETWORKSFrom left to right: Lewis Hawke, Head of PEFA Secretariat; Matthew Smith, The Caribbean Regional TechnicalAssistance Centre, IMF; Brian Olden, International Monetary Fund (Co-chair of the session); Rafika Chaouali, TheWorld Bank (Co-chair of the session); Quyen Vu, The World Bank, Vietnam Office; and Januario da Gama, Ministry ofFinance, Timor-Leste.The working group focused on PEFA’s contribution to budgeting and linking it to the service delivery; modernizingPFM reforms, the role it has played as a monitoring the legal framework; and, the quality of infrastructure.and evaluation tool to better understand PFM reformachievements; and PEFA’s input to the design and im- In Vietnam, the government decided in 2010 to conductplementation of PFM action plans and tracking pro- a PEFA self-assessment. The PEFA assessment providedgress over time. Conference participants who have been the government with the analysis of the state of PFM per-involved in managing and using PEFA assessments pre- formance, its strengths and opportunities, and potential forsented their experience and examples of good practice, improvement. The government was pleased with PEFAand provided the foundation for discussions on how the process and findings, and made the final report available torole of PEFA could be further strengthened in supporting the public.their PFM reform programs, and achieving budgetary out-comes. The experience of the Caribbean countries in using PEFA to feed the PFM reform programs was presented in thePEFA has guided PFM reform plans and their success- conference. As many PEFA assessments have been car-ful implementation in many countries. The experiences ried out in the Caribbean it has made it possible to build aof Timor-Leste, Vietnam, and the Caribbean countries were time series of reforms in some of the countries involved.presented. Timor-Leste has prepared three PEFA as- The importance of being realistic in the sequencing of re-sessments (in 2007, 2010, and 2013). The assessments forms, and of reporting the progress that has beenhave been important to evaluate progress in managing re- achieved, was highlighted.sources and establish a policy framework by using particu-lar performance indicators in the following priority areas ofthe policy framework: revenue collection; performance 24

Januario da Gama, Ministry of Finance, Timor-Leste. Quyen Vu, The World Bank, Vietnam Office.Participants discussing strengths and opportunities of PEFA and its impact on PFM reforms.The experience of these countries showed that PEFA The PEFA assessments in the Caribbean countries led tohas played an important role not only in guiding the the introduction of many of PFM reforms. The Caribbeandevelopment of PFM reform action plans, but also in experience stressed the importance of the appropriate se-monitoring progress over time. In Timor-Leste, the gov- quencing and prioritization of reforms for their successfulernment is still in the process of identifying the causes of implementation. It highlighted that the PEFA report can actsome of the problems revealed by the PEFA assessments, as a ‘good practice note’ for developing action plans andalthough they have a baseline for determining the fiscal that a selection of indicators can be used to monitor pro-envelope for future years and have produced regulations gress without waiting for a full repeat assessment threeand legal framework. There is a strong commitment to im- years down the line. It also highlighted the importance ofplement the recommendations. remembering to pay attention to the basics.In Vietnam, PEFA has played a significant role in reforming All three case studies emphasized the value of usingPFM by helping the government to link the indicators to the PEFA to identify priority areas for improvement bythree budgetary outcomes. The government identified eight shifting the incentive for action to government, and thepriorities for a reform program over the next five years. use of the tool to measure what can be monitored.From a longer list of priorities, the Minister identified 40 pro- They also noted the importance of prioritizing areas for re-posals for action: some of the most significant changes forms and the differences in approach: in Timor-Leste ofhave taken place in the area of moving the budget law to- focusing on legislation; in Vietnam in streamlining planningwards the medium-term fiscal framework; strengthening of processes; and in the Caribbean, of remembering to payfiscal transparency; changes to the budget classification attention to the basics.process; the adoption of the International Public Sector Ac-counting Standards; and development of consolidated fi-nancial statements. 25

PEFA has helped Timor-Leste understand the status of PFMreforms and provide guidance for the future“The rationale for PEFA assessments Timor-Leste has been to assess ourprogress in the implementation of a PFM reform and to know exactly whatthe position of Timor-Leste in PFM reforms is so that furtherrecommendations could be given.As it is stated in the most recent PEFA report, Timor-Leste has made solidprogress in strengthening PFM and achieving fiscal transparency over thelast three years. PEFA especially highlighted the need to improve the linkbetween planning and budgeting.We adopted a principle ‘one plan, one budget, and one system’. In thatsame document the Government explained the reform plan to link planningand budgeting within a multi-year perspective which began last year. Sohere is a clear example of how PEFA has contributed to PFM reform inTimor-Leste.” PEFA 2016 contributing to development of a reform strategy: City of Danang, Vietnam “PEFA has been a valuable tool for Vietnam to help improve understanding of the strengths and weaknesses of PFM in the country. Danang will perform a facilitated self- assessment using PEFA 2016 framework, following the successful approach used by the national Vietnam government in undertaking their PEFA assessment, published in July 2013. In Danang, the PEFA self-assessment process was particularly important in building knowledge and ownership of the report”, said Ms Quyen Hoang Vu, the World Bank’s Senior Economist and Manager of the Technical Assistance program for Danang. “It provided the foundation for government and development partners to work out a strategy for reform which is now being implemented with support from the Swiss and Canadian Governments and the World Bank”. 26

PEFA as an integrated Indicators and outcomes comprehensive baseline for should better inform political PFM system and decisions and ownership of reformsEvidence-based assessment of the entire PFM cycle to Facilitate larger dialogue on identify areas of strengths prioritization and use evidence and weaknesses of real life examples from Enables a better PEFA assessments that show clarity on the status how reforms were successfully of PFM achieved PEFA is a PFM capacity development tool for PEFA could offer more specific government officials guidance on reforms prioritization and how to bridge PEFA is used by most donors as gaps and involve all relevant a single tool for the government actors in reforming PFM dialogue on reform program Its role as eligibility criteria for PEFA is an internationally budget support should be recognized tool with strong quality assurance process reexamined as decisions are often too political Countries should be able to do PEFA assessments themselves and use other countries as peer reviewers PEFA should feed the government M&E framework and this linkage should be established at the moment the PEFA exercise starts not after 27

Using PEFA to Improve Accountabilityand Internal Control NETWORKSNyankor Matthew from the Auditor General's Office of Liberia Participants discussing strengths and opportunities of PEFA to improvepresenting the group findings at the plenary. accountability and internal control.This working group aimed at presenting good practices in ethical culture has to be generated within the institution,using PEFA to strengthen internal control as well as related when there are new demands and initiatives that put pres-processes and institutions. It explored options on how PE- sure on already stretched resources. However, the effortsFA can be used to further improve and strengthen such are worthwhile, as effective internal control result in betterarrangements. The enhancement to the PEFA 2016 PFM systems and generally improves decision-making pro-Framework with regard to internal control was explained cesses.and opportunities to enhance this role of PEFA was dis-cussed. However, PEFA as an independent and credible tool has been central to convince political authorities of the exist-Internal control is the bed-rock of public finance man- ence of weaknesses and the consequences of those weak-agement. As highlighted by CIPFA, it is critical that ap- nesses and this prompts efforts for reform. Country casespropriate functioning systems are in place, because if they such as Bangladesh illustrate how PEFA assessments fa-do not function adequately, it is difficult to see a country cilitated the introduction of a set of initiatives for reform thatachieving the three PFM objectives. Ensuring that “money aim to strengthen internal control systems.is spent as it was meant to be “spent”, are at the center ofefforts to improve transparency, accountability and fight Building an institutional and legal framework for inter-corruption. nal controls will not automatically lead to compliance and application of the rules. Lack of capacity and polit-PEFA 2016 recognizes the importance of effective in- ical will may undermine the reform process. As demonstrat-ternal control throughout the framework, which is ed in Liberia, reform should not only focus on setting thingsclosely evaluated in a number of indicators. In addi- up, but also on delivering the institutional and human re-tion, the PEFA report has been strengthened by incorporat- source capacities to adequately utilize the new instrumentsing a specific subsection dedicated to internal control within put in place.the conclusions of the analysis of PFM systems. Asses-sors are asked to provide an evidence based description of There may be significant challenges to be overcome tohow the internal control system is organized and how effec- implement internal control reforms. The challengestively it operates, based on a set of components identified range from reducing the capacity of political appointees toby international standards, and structured around the five override the system, making them more accountable forcomponents of internal control. breaches of procedure, and requiring an improved attitude towards monitoring internal controls by producing regularImplementation of an effective internal control system documents, to creating protocols and opportunities to meetis difficult, as strong political will is required. Addition- with ministers and explain what things are happening.ally, there is often a lack of clarity amongst stakeholdersabout the exact role and objectives of internal control. An 28

External nature of PEFA Support for internal control assessment makes findings about reforms can provide internal controls more robust and information about political influence and how it affects acceptable to government political outcomes It helps to identify systematic Raise political awareness issues in internal control and and visibility of the provides a single central point of reference on country systems importance of the internal control environment PEFA helps to identify gaps incapacity for implementation of internal The use of the COSO control reforms: i) professionalism, ii) framework in public institutions to improve technical skills, number of staff, internal control programs and sufficient resources, and iii) ethical work plans in the countrystandards – knowledge and sanctions Link to lower level Provides benchmarks for diagnostic tools for internal improvements in internal control controls or build on COSO and PFM, in general PEFA report (provided QA and Allows governments to prioritize peer review) offers a basis for key weaknesses and develop comparability and identification of an action plan for reform good practice Opportunity to use internal control framework and COSO to align objectives and donor support in countries 29

What More Could PEFA Do in theFuture?The discussion of the working group was structured around PEFA Framework are relevant to each of the initiatives.three specific initiatives, each introduced by a short presen- In fact, the three initiatives are just examples of initiatives oftation. This was followed by group discussions of the syner- similar relevance, e.g. Gender Responsiveness Budgetgies between the initiative and PEFA as well as the poten- corresponds to parallel issues of budget responsiveness totial for combining PEFA with each initiative. poverty, inequality and child development concerns amongst others. The question is therefore rather how suchA PFM system constitutes an important ingredient in synergies could be transformed into opportunities for oper-pursuing the development objectives of a government. ational collaboration. Suggestions from the conference par-The system does not exist in isolation and it has to interact ticipants ranged from expanding selected PEFA indicators,with other parts of the administrative system to deliver ser- to adding an annex to a PEFA report with more detail onvices to citizens. For example, public procurement and in- the chosen subject, to designing add-on indicators.vestment management systems are important for the de-velopment of a country’s private sector, but many other Ultimately, the issue is whether there is a stakeholdergovernment policies, regulations and administrative capaci- interest in a country to combine a PEFA assessmentties are equally needed for that development objective to with another type of supplementary assessment thatbe achieved. Hence a PEFA assessment can offer an in- would widen the scope or provide more detailed infor-sight into the performance of administrative systems in cen- mation on a topic considered of particular importancetral government agencies, thus acting as a barometer of in that country context. Supplementing a PEFA as-overall institutional effectiveness. sessment would be easier to manage where assessment instruments already exists (say, on fiscal transparency) or14 out of 31 performance indicators of PEFA 2016 re- where these can be built on to existing indicators (e.g. add-quire public access to government documents and ing sex disaggregated data to the output and outcome re-processes, as part of the scoring criteria. In addition, quirements of PI-8), whereas for other topics a format andmany other government documents and processes are em- a methodology may have to be developed for a supplemen-bedded in PEFA’s indicator scoring criteria, but without ref- tary assessment instrument.erence to public access. Considering the strong emphasison public access, PEFA assessments could be implement-ed in coordination with other fiscal transparency assess-ments such as the Open Budget Survey (OBS).Public participation could be subject of an optional add-on indicator, similar to standard PEFA indicators.Such an indicator had been formulated to cover public ser-vice delivery, investment management and external auditand is undergoing testing in two countries. It would comple-ment the processes of public procurement, revenue man-agement, and budget scrutiny already covered by PEFA.Gender impact is integral to a country’s developmentobjectives which – like other development objectives –requires adequate budget allocations and a strongPFM system to ensure those allocations are made andimplemented as planned. Examples of the appropriate-ness of gender-related allocations in the sports and healthministries were cited, and the new indicator PI-8 on perfor-mance information for service delivery could provide a suit-able starting point for enhancing PEFA by assessing theavailability of performance data disaggregated by gender.As the conclusions emerged from the discussion it Juan Pablo Guerrero, Global Initiative on Fiscalwas clear that the conference participants overall saw Transparency (GIFT).strong synergies between PEFA and each of publicsector reform, fiscal transparency and gender re- 30sponse budgeting, because selected elements of the

Maja Bosnic, SIDA funded Project “ Gender Responsive Budgeting in Ukraine”.Participants discussing future opportunities of PEFA. Performance Annex on gender, plus other orientation of issues i.e. children, poverty, PEFA 2016 happiness and minorities Increased availability of Sex disaggregated data performance information to legislature and general Improve ability to disaggregate data which can public be used for gender and other focused sub-sections Indicators support analysis, including Focus more on gender qualitative aspects especially for public Collectively, new framework provides comprehensive participationbarometer on the effectiveness of 31 institutions and public

BEYOND THE CONFERENCE: WHEREDO WE GO FROM HERE?PEFA Secretariat staff during the conference.There were clear benefits for starting the PEFA Part- make the program more inclusive are underway, by im-nership in 2001 and developing a common assessment proving communication with and between users. There aretool (such as reducing the burden on partner govern- also attempts to increase collaboration between PEFA andments). Other tools – often modeled on the Framework – other initiatives.have been introduced in the intervening years, but the in-creasing number of PEFA assessments completed, under- As the program moves into the next phase, more workway or planned demonstrates that the benefits of establish- will be done to analyze and strengthen the role of PEFA ining PEFA remain valid today. PFM reform and ultimately the role of PEFA in enhancing effectiveness in public service delivery and sustainablePEFA 2016 is acknowledged to be an improvement on development. This is a linkage that is very difficult to ex-the earlier version of the Framework. New features plain considering the issues related to causality – attribu-such as a focus on performance information and the way it tion versus contribution. However, this is an area that theis managed, broadening coverage to include macro-fiscal PEFA Steering Committee and PEFA Partners would likeissues, the management of assets and liabilities (in particu- to invest some resources in the months and years to come.lar, contingent liabilities), and the fact that transparencyissues permeate a number of indicators all contribute to a In future, PEFA will seek to use improvements in tech-more holistic picture of the state of a government’s financ- nology to assist the preparation of assessments and toes. facilitate data and knowledge sharing. The new PEFA web- site provides a foundation for better tools to help asses-The PEFA Partners, through the Secretariat, are sors, researchers and users of PEFA data.providing support to users, including training on theupgraded Framework, in an effort to reinforce the country- Through all aspects of PEFA development and application,led approach that PEFA strives towards. This partly aims to the PEFA program will strive to increase its contribution toavoid the risks of a simplistic use of the indicators and part- improving PFM performance and support sustainable de-ly aims to strengthen the capability of countries to under- velopment.take their own assessments. In addition, measures to 32

CONFERENCE AGENDA DAY 1 08:00 – 09:00 REGISTRATION 09:00 – 09:30 CONFERENCE OPENINGApril 26, 2016 09:30 – 10:30 PEFA – HOW DID WE GET HERE? 10:30 – 11:00 COFFEE/TEA BREAK 11:00 — 13:00 INTRODUCING PEFA 2016 13:00 – 14:00 LUNCH 14:00 – 15:30 IMPACT OF PEFA ON PFM PERFORMANCE 15:30 – 16:00 COFFEE/TEA BREAK 16:00 – 17:15 PEFA AND OTHER PFM DIAGNOSTIC TOOLS 17:15 – 17:40 PLENARY CONCLUSION 17:40 – 18:30 MARKET PLACE – PFM DIAGNOSTIC TOOLS DAY 2 09:00 – 09:15 THE FUTURE OF PEFA – OPPORTUNITIES TO INCREASE ITS 09:15 – 11:00 VALUE FOR PUBLIC FINANCIAL MANAGEMENTApril 27, 2016 Participants break into smaller groups: 11:00 – 11:30 #1 PEFA at the Subnational Level 11:30 – 13:00 #2 Strengthening Public Financial Management Through PEFA 13:00 – 14:00 #3 Using PEFA to Improve Accountability and Internal Control #4 What More Could PEFA Do in the Future? COFFEE/TEA BREAK Reporting back from discussion groups LUNCH 33

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